Question

Below is an excerpt from Bell’s Management Discussion and Analysis from its 10K for the year ended 12/31/2011: Gross margin as a percentage of net revenue improved slightly to 19.1% during fiscal 2011, compared to 16.6% in fiscal 2010 and 15.9% in fiscal 2009.The year-over-year improvement in fiscal 2011 and 2010 was primarily driven by Bell’s continued cost- saving initiatives. During fiscal 2011, component costs continued to decline at a moderate pace that was relatively comparable to fiscal 2010. Management utilized these cost declines to balance profitable growth while passing on cost savings to its customers. Management expects the component cost environment to continue to be favorable during the first quarter of fiscal 2012. As part of management’s focus on improving margins, Bell remains committed to reducing costs through four primary cost-reduction initiatives: manufacturing costs, warranty costs, structural or design costs, and overhead or operating expenses.

RequiredCompare your gross margin percentage calculations in Problem 14-8 to the statistics cited in the MD&A. Does the MD&A help you understand why the gross margin percentage changed between fiscal 2011 and fiscal 2010? In your own words (which may be much clearer than the verbiage in the MD&A), summarize what happened.